Birmingham is committed to charitable giving, but will even more be required?

The Chronicle of Philanthropy issued a report in late 2014 entitled, "How America Gives." The report highlights charitable giving rates across the U.S. based on data from 2012.

Jefferson County's "Giving Profile" is impressive -- people in Jefferson County contributed an average of almost 5 percent of their income to charitable organizations. The Birmingham-Hoover Metropolitan Statistical Area had a giving ratio only slightly lower at 4.78 percent, with gross contributions totaling just more than $1 billion. (This rate of giving substantially exceeds the effective rate of personal income taxation in Alabama.) As a result, Birmingham was ranked the third "most giving city" in the U.S., behind only Salt Lake City and Memphis.

How do Birmingham residents sustain such a high level of giving? While the study measures giving as a percentage of income, the source of many charitable gifts is not only income but the accumulated savings and personal investment of current and prior generations. Thus, charitable giving is not only a reflection of current income and economic activity but also of historical economic activity, and accumulated savings represented by investments in income producing assets.

It may be relevant that, according to the Public Affairs Research Council of Alabama, the State of Alabama, together with cities, counties and other local taxing authorities in the state, has the lowest tax revenue per capita in the United States. Perhaps the same conservative impulses that keep our taxes low motivate generosity towards worthwhile causes. Could our charitable contributions, in part, be offsetting what tax revenues provide for other states? Would the current level of giving continue if taxes are raised?

Along with individuals, corporations have also played a large role in charitable giving in the community - either directly through their own gifts or indirectly through those of their employees and shareholders. The case of Protective Life Corporation is particularly notable. Having just been acquired by Daiichi, Protective Life just over a month ago issued a statement pledging $23 million in charitable giving commitments to the Birmingham community over the next five years.

Recipients of the funds will include nonprofits such as the Alabama Drug Discovery Program, the Birmingham Zoo, the Negro Southern League Museum, the Birmingham Museum of Art and more. This news was welcomed by members of the nonprofit community, as it was reasonable to wonder whether or not a new owner of Protective Life would have the same level of local charitable involvement as the prior ownership. Successful locally owned or controlled businesses tend to give disproportionally to local causes.

It may be cause for concern, in terms of both the need for and availability of charitable giving, that the Birmingham area economy has been lagging behind peer cities in employment and that collections of important taxes supporting local government services have been stagnant or declining in real terms. This is the conclusion of the "Birmingham Area Economic Report for 2014 Quarter 4" published by my firm. Confirmation of this trend will cause local governments to narrow the forms of government expenditures to only the most essential.

To avoid the Catch 22 phenomenon of stagnant government revenues in the face of increased need for investments necessary to attract additional economic activity (and tax revenues), the Birmingham area will need its citizens to dig even deeper. Further, money available to meet public needs, from both taxes and charitable contributions, will have to be invested and spent wisely.